Disability Insurance

It is always important to be prepared in case you cannot work due to an injury or disability. Disability insurance allows you to still collect money from your job even if you are unable to work. There are two different types of disability insurance. There is short-term disability insurance and long-term disability insurance. It is important to explore your employer’s disability insurance options and to ensure the plans cover enough to replace your income.

This section of Disability Insurance covers:

What is Disability Insurance?

Types of Disability Insurance Coverage

Social Security

What is Disability Insurance?

In the United States, at least 51 million working adults do not have disability insurance separate from Social Security support.¹ Disability insurance will replace your income if you are unable to work. Most people are prepared for the medical costs of severe injury or sickness through health insurance. However, without disability insurance you will not be prepared for the loss of wages from a health event.

If you count on your job to pay for your expenses, you should think about having disability insurance. Many employers offer disability insurance for their employees. The plans vary greatly, and some may not offer enough coverage. You will have to pay taxes on the amount you get as a payout if your employer paid for the premiums. Premiums are the amount that is paid every month for insurance coverage. If you pay for the premiums, then the payout is not taxable.

Individual disability coverage is generally much more expensive than employer disability coverage. If your employer provided disability insurance isn’t enough, you may think about getting individual disability insurance.

Types of Disability Insurance Coverage

Disability insurance comes in two types: short-term and long-term. Many employers offer short- or long-term disability coverage during an open enrollment period. Often you do not have to disclose any health conditions during this time. Ask your human resources department about the open enrollment period and how to sign up.

Short-Term Disability Insurance

This coverage replaces part of your lost salary if you miss six months or less of work. The coverage usually begins after other types of leave have been used. Often about 40% to 70% of your pay is replaced.² The length of coverage and how much money you will receive may vary from plan to plan.

Some states have their own rules for short-term disability and may have different requirements. Currently there is no federal law that requires employers to offer short-term disability benefits to their employees.

If you want more information on short-term disability in your area, find your state department of insurance office.

Long-Term Disability Insurance

Typically, long-term disability insurance can be purchased to replace 50% to 70% of your salary. Some employers allow employees to purchase extra insurance from the same company, sometimes raising the total to 80%. Some policies may have a maximum monthly amount that you can receive.

The salary is set at the time the policy is purchased. You will likely want to increase the value of the plan as your compensation increases. Some plans only allow increases with a physical examination. Other plans allow increases without a physical exam for the first few years of the plan.

Long-term disability policies vary in the length of payout. Some policies will only pay out for 5 or 10 years and some will pay out until age 65. Policies also vary in which diseases qualify for payout. Some policies may have exclusions, such as pre-existing conditions. Others may not cover mental health.

Important factors to think about when choosing a long-term disability insurance policy:

A disability policy can be designated as an own-occupation policy. Most policies are any-occupation, which means you must work if you are capable, even if not in the same capacity as before. An own-occupation policy will allow you to collect benefits until you can return to your previous job. Typically, these policies are better if you have a high-skill or high-paying job.

Be aware that government agencies can take up to 24 months to approve a disability claim. You may need to provide documentation such as a doctor’s note and a letter from your employer verifying your bleeding disorder related disability.

If you want more information on long-term care insurance, please go to American Association for Long-Term Care Insurance Information Resource Center.

Social Security

If you make enough income each year, you will have to pay some of that income to Social Security. Benefits from the Social Security Administration (SSA) include Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI).

Not everyone is eligible for Social Security benefits, even if you have a disability. To be eligible for SSDI, you must have a qualifying disability and have enough work credits for a certain length of time. To be eligible for SSI you must have a qualifying disability and not have enough income or other benefits.³

If you want more information about social security benefits, please go to Disability Benefits from the SSA.